Maintain ‘buy’ on Wipro with target of Rs 650

While acquisitions will be part of the 2020 game-plan, efforts would be made to fill strategic gaps and spruce up domain expertise.

We recently hosted Wipro management (Mr Jatin Dalal, CFO and Mr Pavan Rao, IR) for investor meetings. Management spoke about its ambitious 2020 goal of achieving $15 billion revenue with 23% operating margins, drawing on a 7-pronged theme. While acquisitions will be part of the 2020 game-plan, efforts would be made to fill strategic gaps and spruce up domain expertise. Client mining would be key to achieve industry-leading growth. While long-term growth prospects are intact, management alluded to near–term weakness from BFSI and energy verticals. We believe turnaround in Wipro is still some time away, but inexpensive valuations and buyback limit downside. Maintain ‘buy’ with TP of Rs 650 (15x FY18E EPS).

Management’s set forth its 2020 goal of achieving $15 billion revenue with 23% operating margins, drawing on a 7–pronged theme-digital; client mining; market; non–linearity; hyper automation; leveraging partner ecosystem; and turbo charging annuity services. Also, business units, services lines and geographies have plans aligned to the goal. Although they did not disclose organic and inorganic markers, they did spell out 4 areas for acquisitions, viz., digital; business process services; localisation and emerging companies in bay area.

Wipro has aligned its organisation structure to enhance focus on emerging businesses and newer technology.